NZ: Insurer introduces Earthquake risk premium

Tower Insurance has announced a major price increase, as high as 300%, for customers living in earthquake risk zones. Richard Harding, chief executive of Tower, explained that customers in low-risk areas had previously been subsiding those in high-risk areas. "It's a very small number getting large increases but it's a very large number of people getting small decreases," Harding said about the new pricing.

He referenced the 2016 Kaikōura earthquake which caused insured losses of $3 billion, most of the damage being in Wellington, as the reason for the price restructure.

According to RFi Group data, more than 34% of homeowners in New Zealand have home/building insurance, with 39% of Wellington residents indicating they have cover. The majority of those with Tower Insurance can expect a $50-$100 annual discounts on their premiums. However, a small group, less than 1% of its customers, could see price increases exceeding $2000.

While other insurers are also revising policies and adjusting prices following the Kaikōura earthquake, none have announced drastic changes so far. It is therefore likely that many who are faced with price hikes could change insurance providers resulting in Tower Insurance reducing its exposure to earthquake zones. The tower is also investigating price changes for other hazards such as floods.

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